Energy prices inched up to a 7-month high, with a widely observed oil exchange traded fund (ETF) trading back above its long-term trend line, after a significant pullback in crude inventories.
On Wednesday, the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, rose 1.1% and the United States Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, increased 1.2%. USO also moved above its resistance at the 200-day simple moving average while BNO has been trading above its long-term trend for some time. Year-to-date, USO gained 7.5% and BNO advanced 22.3%.
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Meanwhile, WTI crude oil futures were 1.2% higher to $49.2 per barrel and Brent crude was up 1.6% to $49.4 per barrel.
Crude oil prices bounced higher after the Energy Information Administration revealed that U.S. crude stockpiles dipped by 4.23 million barrels, or twice what analysts projected, reports Mark Shenk for Bloomberg.
“It’s nice to see a draw of that size,” Matt Sallee, a manager at Tortoise Capital Advisors, told Bloomberg. “Overall U.S. supplies should show a steady decline through the late summer. The data should be pretty bullish going forward.”
[related_stories]U.S. oil production, which slipped for an 11th week, hit its lowest level since September 2014, further supporting the inventory drawdown. Crude production dipped 24,000 barrels per day to 8.77 million, but the number of active oil rigs in the U.S. remained unchanged at 318 last week, the least amount since October 2009.
“The market wants to see a sustained number of inventory declines before crossing the $50 inflection point,” Adam Wise, an asset manager at John Hancock, told Bloomberg. “The drop in the rig count is starting to be reflected in inventories.”
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Meanwhile, some of the world’s largest producers continue to pump crude at record levels, with the Organization of Petroleum Exporting Countries maintaining Saudi Arabia’s strategy of squeezing out high-cost competitors.
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United States Oil Fund